Annuities are designed to be both a a savings vehicle and a source of retirement income. Annuities offer a number of choices for growing and protecting your income in a way that best meets your needs.
With life expectancy growing each year, receiving an income stream for as long as you live is an important consideration. The lifetime income stream, guaranteed by an annuity insurance company, is a valuable benefit that only an annuity can provide.
An annuity is a contract between you and an insurance company. You put money into the annuity (purchase or premium payments) and in return, it can provide a lifetime income stream. There are many different types of annuities, but the common benefits among all annuities are that they (1) help individuals accumulate money for retirement through tax-deferral, (2) provide them with monthly income that can be guaranteed to last for as long as they live, or (3) both.
Think of an annuity as a personal retirement strategy that can help your money grow and make it last longer when you retire. Your money grows faster because you don’t pay taxes on earnings until you actually withdraw them or until they are distributed to you.
Types of Annuities
Single vs. Flexible Premium Annuities
You may purchase an annuity with a lump-sum payment (a single premium annuity) or make an initial purchase payment with subsequent contributions (a flexible premium annuity).
Deferred vs. Immediate Annuities
Many people purchase annuities because they want their money to grow tax-deferred while they save for retirement. These types of annuities are known as deferred annuities because you are allowing your money to grow before taking income. People who would like to receive income right away may be more interested in an immediate annuity.
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